Health Coverage Requires Contributions to the Plan

March 28, 2007 ( - An employee who was erroneously issued a health insurance card and had some of his claims paid by his employer's health plan administrator is not entitled to benefits because he failed to pay premiums, the U.S. District Court for the Eastern District of Tennessee ruled.

According to the opinion written by District Judge Curtis Collier, the summary plan description (SPD) governing Lowe’s Home Centers Inc.’s health plan requires that payment is due in order to receive  health insurance coverage, and coverage may be terminated with respect to the periods in which it is not received, without notification.

Steve Haley began work at Lowe’s on February 2, 2004, but he never enrolled in the company’s health plan, nor did he pay any contributions toward the plan. He took a leave of absence for a workers’ compensation claim from March 2004 to November 2004, and was notified during that time that if he didn’t make premium payments to his plan that his benefits would be stopped.

Even though he never enrolled in the plan or made contributions, Haley and his wife received insurance cards, and Haley submitted more than $33,000 in claims to the benefits administrator, Connecticut General Life Insurance Company (CIGNA), for which he received $3,633 in compensation for the claims.

In 2005, Haley did enroll in the plan and deductions were made from his paychecks; however, in April 2005, he took another leave of absence and was told several times that if he stopped making payments, his benefits would be terminated.

According to the opinion, Lowe’s claims Haley and his wife are not entitled to insurance coverage at all in 2004, from February 25, 2005 through April 9, 2005, and after April 22, 2005 because they didn’t make contributions to the plan.

Lowe’s contends that the payments and issuance of cards were a clerical error and not a recognition that Haley and his wife had coverage. Collier writes that such “an error could not lead to a meeting of the minds as to the essential terms of the insurance contract, which is necessary to establish a contract’s validity.”

Haley v. Lowe’s Home Centers Inc., E.D. Tenn., No. 1:05-CV-257, 3/20/07.